Direct PSO Payments Mechanism
The Commission for Regulation of Utilities (CRU) has today announced the mechanism for delivering the benefit of a Public Service Obligation (PSO) payment to all electricity customers for the remainder of the tariff year 2022/23.
Historically, the PSO Levy is charged to all electricity final customers to fund schemes designed by the Irish Government to support the greater integration of renewable generation and to meet its national targets. To date these schemes have been successful in incentivising over 4,200 MW of renewable generation.
Due to the inverse relationship between the PSO and the wholesale electricity price, when wholesale electricity prices are lower, due to lower gas prices, renewable generators, which do not require gas, require greater levels of support to provide electricity in the wholesale market, resulting in a higher PSO Payment by customers on their bills.
Currently wholesale electricity prices are high, due to the higher gas prices, meaning that renewable generators receive greater revenues for the electricity they sell in the wholesale market. As a result, for the PSO Year 2022/23, no support for these renewable generators is required from the PSO and, under the terms of the scheme, the benefits of buying from renewables generation are now to be paid back to customers through a PSO Payment on their bills.
The impact for bill paying customers will mean that their electricity supplier is required to credit customers €89.10 for the remaining seven months of the 2022/23 tariff period. This monthly PSO Payment of €12.73 will be clearly reflected as an individual billing line item on every customer’s bill. Customers are not required to take any action and the payment will be reflected on the first bill received based on usage of electricity from the 1st of March.
For prepay meter customers, the PSO Payment will be credited daily to their prepayment meter by deducting the PSO Payment due to customers from the daily electricity standing charge by the customers electricity supplier. No action from the prepay customers is required and the PSO Payment will be reflected through a reduced standing charge on a daily basis from the 1st of March 2023.
All electricity customer groups will receive the benefit of the PSO payments. Small Commercial customers will receive a monthly payment of €44.50 beginning in March until September 2023. Medium and large commercial customers will be paid based on their kVa usage.
The new legislation to enable the making of payments to customers will be published by the Department of the Environment, Climate and Communications (DECC) in the coming weeks. In advance of this, the CRU, the Distribution System Operator (ESB Networks) and the Transmission System Operator (EirGrid), have been working to develop the detailed mechanism to facilitate payments to customers that will begin from the 1st of March. This follows the reduction of the PSO Levy to zero in October 2022.
More details of the process can be found here. As the PSO funding requirement is calculated for each Tariff year from 1st October until 30th September, the PSO funding requirement for the Tariff year 2023/24 will be calculated and decided in July 2023. This will determine if either PSO payments to electricity customers or a PSO Levy is required for that period.
Commenting on the decision, CRU Director of Security of Supply and Wholesale, John Melvin Said: “This measure was announced as part of the 2022/23 PSO Levy decision due to the unprecedented global wholesale gas prices that we have seen in 2021 and 2022. Given that this was the first time we have experienced a negative PSO levy amount, the PSO payments will come as an additional relief to all electricity customers over the coming months.”